Monthly Issue
From Home Furnishing Business
October 13,
2016 by Jane Chero in Business Strategy, Industry 
By Bob George
This issue’s focus is on innovation, a focus that we plan to repeat each year. We believe that it is important to recognize the impact of game-changing developments that contribute to the future success of furniture retailing.
I have been fortunate to be involved with Impact Consulting’s performance groups over the past decade. A cornerstone of the process is to share “Best Ideas.” Each member prepares a written presentation that describes a best idea expanding upon why this best idea was developed, what was the approach to implementation, and finally the success of the best idea. The members take the process seriously contributing dollars to a winner pool. This pool is won by the idea voted the best by the group. The ideas are often simple and receive comments from the group such as “Why didn’t I think of that?” But more importantly, these ideas are shared with others in the group to be not only implemented, but also improved upon.
As a management consultant attending these meetings with the confidentiality agreement firmly in place causes my mouth to water at the possibilities of sharing with others these unique ideas. However, I resist the temptation and wait for the idea to emerge in the industry and it will because good ideas cannot be suppressed. Fortunately, some retailers give permission to distribute because they know that an idea is worth nothing until it is implemented. Implementation is what differentiates great retailers from good retailers. If the traditional retailer is to survive the onslaught of new distribution models, then innovation or more simply put best ideas, must become part of the ongoing process. Our performance group members are consistently in the top quartile of financial performances. The best ideas that they generate focus on specific financial elements and the results reflect that execution.
We are considering creating an industry-wide “Best Idea” contest. There will be an entrance fee, a panel of seasoned retailers who will judge the entrants, and finally a winner to share the pot. What do you think? This is how innovation occurs – a single idea that evolves to a positive outcome. Why should we leave out the manufacturers? They need to innovate as well.
An Update
As we communicated in the May issue we have changed the structure of our editorial staff to have editors with specific expertise in each area. In that effort we are pleased to announce the following.
Veteran journalist, Larry Thomas, who has covered the home furnishings industry for more than twenty-five years, has joined Home Furnishings Business as business and financial editor. In his new position he will focus on business and financial news and will write feature articles for the monthly magazine. He will also oversee the daily newsletter, Home Furnishings Business Now, and will write additional content for the HFB website, www.HFBusiness.com. Larry’s expertise will add a depth of understanding of the business and finance implications of the issues facing the industry. Please send any information to lthomas@hfbusiness.com.
Home Furnishings Business is pleased to have Trisha McBride Ferguson on our staff as our Product & Style editor. She brings over twenty years of industry experience as a writer and designer. She has worked closely with many leading home furnishings manufacturers. She is also Editor in Chief of our customized retailer magalogs which blend consumer home decorating content with furniture product information to drive retail traffic. Please send information about your product-related news and events to trisha@hfbusiness.com.
September 9,
2016 by Jane Chero in Industry, Internet
One of the most discussed issues in the industry today is the internet and the impact this new distribution channel is having on traditional ‘brick and mortar’ retailing. The reason for this concern is obvious when we look at the graphic below.
Without a doubt, a significant percent of furniture revenue is moving through e-commerce. The saving grace is that of this total, 49% is sold through furniture retailers with a ‘brick and mortar’ presence.
The growth of internet sales is still more than twice the rate of store sales growth. However, in the last two years, e-commerce growth has slowed down as the table below illustrates.
This finding is the same as was found in the Fourth Annual Major Purchase Consumer Study (June 2015) conducted by Synchrony Financial that concluded a 2% drop in purchases online from 2014 to 2015. While the total number of purchases has decreased, the total sales volume through e-commerce has grown.
However, it still remains a significant portion of the industry volume. To raise another point, other alternative channels are capturing almost the same level of sales as e-commerce. In some cases, such as mass merchants, the sales levels are higher than those seen with e-commerce. The question must be raised, “Should the industry not be as concerned with these channels? The graphic, a repeat from the April issue on distribution channels, explores the impact.
An historical perspective can sometimes be viewed as a negative. However, when the catalog showrooms, such as Blackwelders, Roses, and Furnitureland South, threatened the status quo of the industry, the discussion was the same. Furnitureland South alone remains, but only by adapting its strategy. Likewise, when Costco debuted its “furniture only” store in Washington State, many proclaimed the end of furniture retailing as we knew it.
The traditional industry has weathered the storm of other alternative channels and survived, but each new channel has taken a portion of sales until the traditional channel now represents less than 40% of the market. Maybe we need to change instead of surrendering a portion of our sales.
September 9,
2016 by Jane Chero in Advertising, Bedroom, Industry, Product
Dreamy Bedrooms
By Trisha McBride Ferguson
The Bedroom category (master bedroom and adult bedroom furnishings) has been climbing steadily in annual sales over the last five years. In 2015, the year ended with $10.86 billion in sales, up from $10.36 billion in 2014. Adult bedroom continues to see growth this year with second quarter up 3.75 percent over the same quarter last year.
Universal’s Halston
Part of its Curated collection, the Halston fully upholstered bed features a tufted headboard with subtle arch and nailhead trim. It’s shown here in a gray cotton velvet and is also available in linen. Suggested retail $1.875.
A.R.T. Furniture’s Epicenters Williamsburg
Directly inspired by the warehouse-turned-loft neighborhood of Williamsburg in Brooklyn, NY, this bed features a stacked railroad tie design, a reclaimed pallet finish, and a two-drawer storage footboard. Suggested retail for the King bed is $2,999.
Ashley’s Windlore
Rustic yet refined, the Windlore bedroom collection maximizes the beauty of minimalism. Its rustic oak-grain character is enhanced with a two-tone finish that modernizes its plank styling and hardware-free design.
Cresent Fine Furniture’s Larkspur
Simple yet sophisticated, the Larkspur platform panel bed features clean lines and a fresh finish. Suggested retail for the Queen bed is $1,199.
Flexsteel’s Homestead
This solid hardwood bedroom group is crafted of birch veneers and features a black rub-through finish. Its round metal hardware wears a gunmetal finish and the bed and mirror are available with metal or solid-wood frames.
Furniture Traditions’ Master-piece Pier Group
Full of innovative features and clever details, the Master-piece pier group adds function and interest to a timeless look.
Greenington’s Currant
Crafted of 100-percent solid Moso bamboo, the Currant bedroom collection blends contemporary and Mid-century Modern influences. An eco-friendly and sustainable option, the platform bed is shown here in a black walnut finish. Suggested retail for the Queen bed is $1,878.
Hooker Furniture’s Chatelet
This upholstered mantle panel bed is part of Hooker’s whole home collection inspired by timeless antiques found in Old World Europe. The epitome of rustic luxury, its look is defined by pecky pecan veneers wearing a soft amber finish with highlights of distressed aged white.
Ligna Furniture’s Jackson
Crafted of solid, rough-hewn mahogany, the Jackson collection fuses modern and rustic. The bedroom group wears a cinnamon and sea salt finish.
Modus’ Townsend
Effortlessly stylish, the Townsend collection is crafted from solid hardwood and features naturally rough-hewn planks with heavy saw marks, pitting and distressing. A nine-step finish highlights its wood grain while simulating the patina of age. Suggested retail for pieces in the bedroom group range from $299 to $2,249.
Orient Express Furniture’s Boulevard
The Villa Collection’s Boulevard bed is one of Orient Express’ most iconic pieces. Its scalloped headboard is covered in an oatmeal linen and features a button-tufted back and nailhead trim around its headboard and rails. Suggested retail starts at $1,699.
Stanley’s Virage
Part of its whole home collection, the Virage Panel bed combines stark lines and clean surfaces with subtle moulding details and sweeping arched plinth bases. Its cherry veneers wear a Truffle finish accented by lightly striated Caviar black paint and glowing hand-applied Antique Gold Leaf highlights. Suggested retail for the Panel bed is $2,829.
Stickley’s Highlands
Stickley’s Mission collection is crafted from solid, quarter-sawn white oak and includes the distinctive yet timeless Harvey Ellis bedroom group.
Vanguard’s Emma Bed
From Vanguard’s “Make it Yours” bedroom program, the Emma bed features a fully upholstered headboard and footboard. Available in fabric or leather, its tufted headboard is accented with nailhead trim. Suggested retail for King starts at $4,146.
September 9,
2016 by Jane Chero in Business Strategy, Industry, Internet
Mention furniture and home furnishings sales sold via the internet, and the focus immediately turns to B2C retailing (business-to-consumer). So it may be surprising to learn that it’s the e-commerce (e-shipments) B2B platform (business-to-business) that has been exploding and generating buzz in the furniture industry.
A recently released report from the Census Bureau shows B2B e-shipments within the furniture and related products manufacturing segment (NAICS code 337) is now approaching 51 percent of the value of total shipments or $35.2 billion dollars in 2014. (Source: U.S. Census Bureau E-Commerce Report 2002 to 2014, June 7, 2016). The Census Bureau defines manufacturers’ shipments to include “orders accepted for manufactured products from customers, including shipments to other domestic plants”. While this appears to be double counting in some instances, it does little to diminish e-commerce’s impact on the wholesale furniture industry. (See Methodology and Definitions box for additional information). B2B e-commerce is changing the way manufacturers market and sell their products to both retail brick and mortar customers and online furniture retailers creating increased sales on one hand and distribution channel crises on the other.
E-Commerce across Vertical Furniture Industry Segments
The product categories included in data published by the Census Bureau may differ somewhat between furniture manufacturing shipments, merchant wholesaler shipments, and retail sales; however, the trend in e-commerce is the same. (See Methodology and Definitions box.) As of 2014, e-commerce accounts for over half (50.6 percent) of all furniture and related product shipments – up from 14.4 percent in 2004 (Table A). During the same time period, e-commerce sales of furniture and home furnishings within the retail trade sector increased 503 percent – representing 15.3 percent of total retail dollars. While e-commerce among the merchant wholesale trade of furniture and home furnishings increased steadily since 2004, the share of overall sales have remained stagnant since 2009 – increasing from 14.3 to 14.4 percent.
Manufacturing Shipments
As Table B shows, the total value of manufacturing shipments in the furniture industry took a downturn alongside the economy during the recession. The 2014 value at $69.6 is still 9.9 percent below 2002. E-commerce shipments on the other hand kept an upward trajectory through the recession – increasing a total of 335.9 percent over 12 years. While total furniture and related products manufacturing increased by 15.4 percent since 2009, e-commerce shipments jumped another 70.3 percent to finish 2014 at $35.2 billion.
The percentage of total dollar shipments via e-commerce has climbed from 10.5 percent in 2002 to 50.6 percent in 2014 with the vast majority of growth (313 percent) occurring between 2002 and 2011 (Table C). From 2011 to 2013, increases of e-commerce as a percentage of total shipments tapered off. However, an 11 percent jump in 2014 pushed e-commerce to over half of furniture and related products shipment dollars.
E-Shipments: Furniture Manufacturing vs. Total Manufacturing
While e-shipments have grown at a rapid pace, furniture and related products manufacturers are still lagging slightly behind all manufacturing in the percentage of e-commerce shipments to total (Table D). In 2014, total e-shipments in all industries were 60.9 percent of total manufacturing compared to furniture e-shipments at 50.6 percent. Both total manufacturing e-shipment dollars and furniture e-shipment dollars increased an annual average of 14 percent from 2004 to 2014.
Merchant Wholesalers and MSBO’s
Merchant Wholesalers are wholesalers who sell goods on their own account such as distributors, jobbers, drop shippers, import/export merchants, and MSBOs. Manufacturers’ Sales Branches and Offices (MSBOs) are establishments maintained by manufacturing, refining, or mining enterprises apart from their plants or mines for the purpose of marketing their products. Sales branches will typically carry inventories, while sales offices typically do not. – U.S. Census Bureau
Since the turn of the century, e-commerce has slowly climbed its way into the furniture and home furnishings merchant wholesale trade. Merchant wholesalers weathered the recession well growing 43.8 percent in sales 2002 to 2014 to $76.9 billion while the e-commerce portion of those sales jumped 113 percent to $11.1 billion. MSBOs total shipments at $21.0 billion in 2014 grew more slowly -- 17.3 percent 2002 to 2014. E-commerce shipments from merchant wholesalers alone have increased a yearly average of 7 percent, while furniture MSBO’s have increased by 3 percent.
Although increasing just 30 percent in e-commerce sales from furniture MSBOs over 12 years, e-commerce accounts for 21 percent of furniture and home furnishings MSBOs (Table F) compared to other merchant wholesalers at 14 percent. As a percent of total shipments, e-shipment sales of both merchant wholesalers and MSBO’s have declined since 2011.
With more advanced websites and ordering portals that make it easier for a business to make purchases online, e-commerce should continue to grow as a key part of the furniture industry. Manufacturers look to e-commerce to increase sales and broaden its customer base. This approach, however, presents a challenge to manufacturers in terms of personalized customer service and maintaining that sales rep relationship.
September 9,
2016 by Jane Chero in Business Strategy, Industry
As a boy growing up in North Carolina I well understood the “dog days of summer” when it was too hot and humid to move too far from the porch and a pitcher of lemonade. This term in business refers to the quietest months of the year. Well, it has been dog days for all of 2nd Quarter and recent results would indicate that it is continuing. Our hopes are now pinned on the upcoming Labor Day.
When business is this slow the typical reaction is to look at external factors that may be contributing to this problem. When we see the statistics we find that they too are at a standstill. Housing starts annualized are up slightly. Consumer confidence is also up slightly going from 96.5 to 97.3, while unemployment for the year is down slightly. So what’s the problem?
The challenge is to get consumers excited about their environment, not merely to replace a broken piece of furniture. Disregard the impact of ecommerce and focus on what is, in my opinion, the most important internet opportunity, which is the ability to communicate with and, more importantly, to interact with your customers.
The retailers’ website has become the “front door” of your business. Take a hard look at your home page. How long has it been since it was updated? Not merely product update, but also color story, the site’s overall look and feel, and, very important, how inviting it is to the consumer. Give the site the same attention that you give the “landing zone,” that first impression the consumers have when they enter your store. Four times more consumers see your home page than your store entrance!
Once consumers pass the home page how are you engaging them? Oversized banners proclaiming the latest financing package should not be the first “words” out of your mouth. Engaging consumers with conversation about what they want to do with their houses is where their interest lies. Many retailers have design tools to assist consumers, but frequently these tools are not “front and center.”
While we wait for Labor Day to ignite the last quarter of the year, it is a good time to take a hard look not only at the web site, but also the merchandise strategy. How does your “bell-shaped” curve of slots by price point compare with the industry? Assortments out of bounds can negatively impact sales by 20-30%.
I understand that you don’t want to interact very much with your sales associates because they will complain about the lack of traffic. This is the time to engage them to keep them “sharp” when the customer does arrive. Take this opportunity to observe their sales techniques. Are they following the five-step selling technique they were taught or are they going directly to close?
The point of all of this is to use this time to visualize what you want your operation to be and then start the process. It is better than languishing in the dog days of summer. Call if you need a motivation session.